Income Tax Appellate Tribunal - Chennai
D.B.Prakash Chand Jain, Chennai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH "B" CHENNAI
(Before Shri Hari Om Maratha, Judicial Member
and Shri Abraham P. George, Accountant Member)
.....
I.T.A. Nos. 1629 & 1630/Mds/2009
Assessment Years : 2003-04 & 2004-05
The Assistant Commissioner Smt. Suraj Kumari Jain,
of Income Tax, 46, Dewan Rama Road,
Company Circle V(2), v. Purasawalkam, Chennai - 600 084.
Chennai - 600 034.
PAN : AAWPS6945G
(Appellant) (Respondent)
C.O. Nos. 193 & 194/Mds/2009
(in I.T.A. Nos. 1629 & 1630/Mds/2009)
Assessment Years : 2003-04 & 2004-05
Smt. Suraj Kumari Jain, The Assistant Commissioner
46, Dewan Rama Road, of Income Tax,
Purasawalkam, Chennai-84. v. Company Circle V(2),
Chennai - 600 034.
(Cross Objector) (Respondent)
I.T.A. No. 488/Mds/2010
Assessment Year : 2003-04
Smt. Suraj Kumari Jain, The Assistant Commissioner
46, Dewan Rama Road, of Income Tax,
Purasawalkam, Chennai-84. v. Company Circle V(2),
Chennai - 600 034.
(Appellant) (Respondent)
2 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09,
I.T.A. No. 486 to 488/Mds/10,
I.T.A. Nos. 1640 & 1641/Mds/09,
I.T.A. Nos. 1631, 1632 & 1633/Mds/2009
Assessment Years : 2002-03, 2003-04 & 2004-05
The Assistant Commissioner Shri D.B. Prakash Chand Jain,
of Income Tax, 46, Dewan Rama Road,
Company Circle V(2), v. Purasawalkam, Chennai - 600 084.
Chennai - 600 034.
PAN : AAIPP3249G
(Appellant) (Respondent)
C.O. Nos. 195, 196 & 197/Mds/2009
(in I.T.A. Nos. 1631, 1632 & 1633/Mds/2009)
Assessment Years : 2002-03, 2003-04 & 2004-05
Shri D.B. Prakash Chand Jain, The Assistant Commissioner of
46, Dewan Rama Road, Income Tax, Company Circle V(2),
Purasawalkam, Chennai-84. v. Chennai - 600 034.
(Cross Objector) (Respondent)
I.T.A. Nos. 1640 & 1641/Mds/2009
Assessment Years : 2003-04 & 2004-05
The Assistant Commissioner Shri Mukesh Kumar Jain,
of Income Tax, 46, Dewan Rama Road,
Company Circle V(2), v. Purasawalkam, Chennai - 600 084.
Chennai - 600 034.
PAN : AAJPM5477E
(Appellant) (Respondent)
3 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09,
I.T.A. No. 486 to 488/Mds/10,
I.T.A. Nos. 1640 & 1641/Mds/09,
C.O. Nos. 198 & 199/Mds/2009
(in I.T.A. Nos. 1640 & 1641/Mds/2009)
Assessment Years : 2003-04 & 2004-05
Shri Mukesh Kumar Jain, The Assistant Commissioner
46, Dewan Rama Road, of Income Tax,
Purasawalkam, Chennai-84. v. Company Circle V(2),
Chennai - 600 034.
(Cross Objector) (Respondent)
I.T.A. Nos. 486 & 487/Mds/2010
Assessment Years : 2003-04 & 2004-05
Shri Mukesh Kumar Jain, The Assistant Commissioner
46, Dewan Rama Road, of Income Tax,
Purasawalkam, Chennai-84. v. Company Circle V(2),
Chennai - 600 034.
(Appellant) (Respondent)
Revenue by : Shri K.E.B. Rangarajan
Junior Standing Counsel
Respondent by : Shri T. Banusekar
O R D E R
PER BENCH :
These are appeals and cross-objections relating to assessees Smt. Suraj Kumari Jain, Shri D.B. Prakash Chand and Shri Mukesh Kumar Jain, for various assessment years. Since the factual 4 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, scenario giving rise to the appeals and cross-objections are more or less similar, the appeals and cross-objections are dealt with through this consolidated order.
2. Appeals and cross-objections Smt. Suraj Kumari Jain are taken up first for disposal.
3. Out of the five appeals, two are cross-objections of the assessee relating to assessment years 2003-04 and 2004-05 and two are appeals of the Revenue relating to same assessment years. One appeal of the assessee is against the order of Commissioner of Income Tax, Chennai-III, under Section 263 of Income-tax Act, 1961 (in short "the Act") for assessment year 2003-04. Cross-objections of the assessee for assessment years 2003-04 and 2004-05 have similar grounds and assail jurisdiction of the A.O. to do the assessments as well as reopening done for respective assessment years. Since these go to the root of the matter, the cross-objections are decided first.
5 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
4. As mentioned above, the grounds raised vide the cross- objections for both the assessment years are similar. Two issues are raised in these cross-objections. First one is that the original notice having been issued by ITO, Company Circle IV(2), the completion of assessments by another, namely, ITO, Company Circle V(2) was invalid since the latter Assessing Officer was not having jurisdiction over the assessee. Learned A.R. in support of his contention that the Assessing Officer did not have jurisdiction to do assessment over the assessee, called our attention to a letter dated 2.9.2005 from Deputy Commissioner of Income Tax, Central Circle III(4) stating that jurisdiction of the assessee lay with ITO, Ward XIV(2). However, as per the learned A.R., notice under Section 148 of the Act for both the impugned assessment years, was issued by ITO, Company Circle IV(2) on 19.12.2006. Learned A.R. pointed out that reasons for reopening the assessments were also given by the same Assessing Officer on 26.2.2007. However, as per the learned A.R., the assessment was nevertheless completed by ITO, Company Circle V(2) for both these assessment years and orders under Section 6 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, 143(3) read with Section 147 of the Act were issued on 26.12.2007. As per the learned A.R., the assessee was already informed by DCIT, Central Circle III(4) as early as on 2.9.2005 that jurisdiction in her case lay with ITO, Ward XIV(2). Nevertheless, notices were issued by another officer and assessments completed by yet another officer. Therefore, according to him, assessments having been done by a non-jurisdictional officer, were void.
5. Per contra, the learned D.R. submitted that Section 292B of the Act came to the aid of the Revenue. Since assessee had not only co- operated with the proceedings, but the notices and all other proceedings were in substance and spirit in accordance with law. Further, according to him, under Section (3) of Section 124 of the Act, assessee ought have objected to the jurisdiction before the concerned Assessing Officer within one month from the notice under Section 142(1) and having not done so, it could not at this stage raise up this issue regarding jurisdiction.
7 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
6. In reply, learned A.R. submitted that assessee had, vide her letter dated 27th November, 2007 to the ITO, Company Circle V(2), brought to his attention that he was not having jurisdiction to assess the assessee. Therefore, according to him, objections were placed by the assessee before the concerned Assessing Officer. Learned A.R. also submitted that Section 292B would not help the Revenue in this respect, since the notices were issued and assessment done by an officer, who were not having jurisdiction over the assessee, therefore, it could not be considered as done in a manner that was in substance and effect conformity with and according to the intend and purpose of the Act.
7. We have perused the orders and heard the rival contentions. There is no dispute that assessee had received a letter from DCIT, Central Circle III(4), Chennai, on 2.9.2005 that jurisdiction over her case lay with ITO, Ward XIV(2), Chennai. There is also no dispute that subsequent notice under Section 148 dated 19.12.2006 was issued by a different ITO, namely, ITO, Company Circle IV(2). There is also no dispute that assessee co-operated and appeared before 8 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, the said ITO during the course of re-assessment proceedings. Assessee had also brought to the notice of ITO, Company Circle V(2) on 27th November, 2007 that jurisdiction on her case lay with ITO, Ward XIV(2). No doubt, we do accept the contention of learned A.R. that Section 292B does not have any implication in the given scenario since the question is regarding jurisdiction of the concerned officer to issue notice and to make an assessment and it has nothing to do with the spirit and intend of the Act. Nevertheless, it is important to have a look at sub-section (3) of Section 124 which is also very relevant in this regard. The said sub-section runs as under:-
(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer--
(a) where he has made a return 50[under sub-section (1) of section 115WD or] under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-
section (1) of section 142 or 50[sub-section (2) of section 115WE or] sub- section (2) of section 143 or after the completion of the assessment, whichever is earlier;
(b) where he has made no such return, after the expiry of the time allowed by the notice under 51[sub-section (2) of section 115WD or sub- section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144] to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier. 9 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, There is no dispute that in pursuance of notices under Section 148 of the Act issued by ITO, Company Circle IV(2), assessee had, vide her letter dated 5th February, 2007 (placed at paper-book page 8) as well as letter dated 20th December, 2006 (placed at paper-book page 7) and also letter dated 6th February, 2007 (placed at paper-book page
9), requested the Assessing Officer to consider her returns earlier filed for the respective assessment years, to be returns filed in pursuance of the notice under Section 148 of the Act. Thus, without doubt, assessee had participated in the proceedings before ITO, Company Circle IV(2). Once assessee had filed a return, vide sub- section (3) of Section 124 of the Act, he or she could not question the jurisdiction of the Assessing Officer unless objections in this regard were filed before expiry of one month from the date on which he or she was served with a notice under sub-section (1) of Section 142 of the Act. Here, admittedly, assessee herself stated that notice under Section 142(1) of the Act was issued by ITO, Company Circle IV(2) on 19.12.2006 (Sequence of events submitted by assessee) and objections, if it can be called so, were filed by the assessee (placed at 10 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, paper-book page 24) on 27th November, 2007. Thus the letter filed by the assessee was more than eleven months after the date of issue of notice under Section 142(1) of the Act. Even in this, particular letter filed on 27th November, 2007, assessee had just informed the Assessing Officer regarding jurisdiction of the assessee being with ITO, Ward XIV(2) and this by itself could not be considered as raising of an objection. Relevant para 10 of letter dated 27th November, 2007 is reproduced hereunder:-
"I also wish to inform you that vide letter dated 02/09/2005 from the office of the Deputy Commissioner of Income Tax, Central Circle - III(4), Chennai I was informed that the jurisdiction of my case lies with the Income Tax Officer, Ward XIV(2), Chennai with effect from 01/09/2005."
We are, therefore, of the opinion that the assessee did not call into question the jurisdiction of Assessing Officer who had proceeded with the assessment and/or completed the assessment within the proper time frame allowed under Section 124(3) of the Act. This being so, assessee cannot be allowed to take up this issue now. Grounds assailing jurisdiction of the A.O. to do the assessment is dismissed. 11 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
8. The next issue taken up by the assessee in her cross- objections is that the reopening itself was bad in law. According to assessee, the objections raised by her on the reasons required for reopening were not disposed through a separate order and therefore, the decision of Hon'ble Bombay High Court in the case of Allana Cold Storage Ltd. v. ITO (287 ITR 1) was not complied with. The issue regarding objection and reopening was dealt by the CIT(Appeals) at para 5 of his order as under:-
"5. The assessee has objected to the initiation of reassessment proceedings on the ground that the Assessing Officer did not have the requisite jurisdiction and had not compiled with the statutory requirements of law to initiate such reassessment proceedings. It is however, seen that the returns of income under consideration had only been processed and no assessment had been made for any of the two assessment years presently under consideration. Both the reassessment proceedings were initiated within the period of four years from the end of each of the relevant assessment years. Loans having been given by the company to the assessee, the Assessing Officer legitimately had a prima facie reason to believe that incomes chargeable to tax had escaped assessment. Reasons for reopening were communicated to the assessee and her objections were also dealt by the Assessing Officer. On these facts the reopening of assessment of both these assessment years is held to be valid and the assessee's appeals questioning the jurisdiction for reopening are hereby dismissed for both these assessment 12 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, years. In coming to the conclusion reliance is placed on Apex Court decision in the case of Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Private Ltd. [291 ITR 500 ]."
9. Now before us, learned A.R. submitted that the reasons though communicated to the assessee, the objections raised by her were not dealt by the ld. A.O. separately, but, dealt with only in the assessment order. Therefore, according to him, the re-assessment was bad in law. Further, according to him, reason cited for the reopening was not relevant.
10. Per contra, the learned D.R. supported the order of ld. CIT(Appeals).
11. We have perused the orders and heard the rival contentions. Original return, as mentioned by ld. CIT(Appeals), was only processed under Section 143(1) of the Act and the reopening was done within four years. The reason intimated by the Assessing Officer to the assessee is clear from his letters dated 26.2.2007 placed at paper-book page 10 to 12. That for assessment year 2003- 04 is reproduced hereunder:-
13 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, "The assessee is a Director of M/s Prakash Gold Palace (P) Ltd. (erstwhile M/s Abhilasha International Pvt. Ltd.) and have substantial interest in the company. The company, out of the accumulated reserves and surplus of ` 6,71,38,172/- has distributed a sum of ` 44,91,589/- as advance to the assessee during the Assessment Year 2003-04. The distribution of the advance is subject to tax U/s 2(22)(e) of the Income tax in the hands of the assessee as deemed dividend. No dividend tax has been paid by the assessee towards the advance received."
But, for the variance in amounts, the reason stated for assessment year 2004-05 was also very similar. There is no dispute that original return was subject only to a processing under Section 143(1) of the Act. Therefore, the above reason, in our opinion, is more than sufficient to resort to a reopening, in view of the decision of Hon'ble Apex Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (291 ITR 500). Irrespective of the fact whether the Assessing Officer had separately dealt with the objections raised by the assessee or not the reasons cited by the A.O. was quite relevant and satisfied the condition for the reopening. We, therefore, do not find any merit in the grounds raised by the assessee in this regard.
12. The grounds assailing the reopening stand dismissed.14 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
13. In the result, both the cross-objections of the assessee are dismissed.
14. Now we take up the appeals of the Revenue for respective assessment years, in I.T.A. No. 1629 & 1630/Mds/2009.
15. As already mentioned, the returns for these assessment years were originally processed under Section 143(1) of the Act and later reopened for a reason that applicability of Section 2(22)(e) of the Act on the advance received by the assessee from M/s Prakash Gold Palace (P) Ltd. was not considered. Assessee was a Director of a company called M/s Prakash Gold Palace (P) Ltd., earlier known as Abhilasha International Pvt. Ltd. Assessee held 2,86,155 shares of that company, out of which, 2 lakhs shares were transferred on 22.12.2001 to her minor grandson, Lakshya Mutha. Assessing Officer was of the opinion that advance of ` 44,91,589/- received by the assessee in previous year ended on 31.3.2003 and ` 25,85,420/- received during previous year ended on 31.3.2004, from M/s Prakash Gold Palace (P) Ltd. were to be treated as deemed dividend in her 15 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, hands under Section 2(22)(e) of the Act, since assessee's share holding in the said company exceeded 10% of the voting power. Assessee was put on notice in this regard. Reply of the assessee was that out of total shares 2,86,155 she had, already transferred 2 lakh shares to her minor grandson as early as 22.12.2001. Therefore, according to assessee, she was holding only 4.75% or in other words, much less than 10% of the total shares of Prakash Gold Palace (P) Ltd. as at the beginning as well as the end of the relevant previous years. It was argued by the assessee that Section 2(22)(e) of the Act had no applicability on the advance received by her from the said company. However, the A.O. was not appreciative of these contentions. According to him, though assessee had transferred more than 90% of her shares to her minor grandson, her own trial balance clearly showed that she was herself holding the shares, in different names, i.e. in her own name and in her grandson's name. Therefore, according to A.O., the grandson being minor, the assessee was to be taken as holding shares by herself. Further, as per A.O., the Companies Act, 1956 did not allow minor to be a 16 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, registered shareholder. Reliance was also placed on Section 94 of the Act which, brought within the purview of taxation, certain type transfers or sale of securities and also Section 64(1A) of the Act which stipulated clubbing of income of minor with his or her parent. As per A.O., Section 2(22)(e) of the Act clearly specified that a shareholder who was beneficiary also fell within the purview of the deeming provision. He also relied on the decision of Hon'ble Apex Court in the case of McDowell & Co. Ltd. v. CTO (154 ITR 148) for taking a view that the transfer of shares by the assessee to her minor grandson was a colourable device and could not be taken cognizance of. Since the company concerned had substantial reserve, the Assessing Officer took the advance taken by the assessee from the company for the above two assessment years as deemed dividend as per Section 2(22)(e) of the Act.
16. Assessee aggrieved by the above decision, moved in appeal before ld. CIT(Appeals). Ld. CIT(Appeals) was of the opinion that Section 2(22)(e) of the Act was a deeming provision and hence had to be given a strict interpretation as held by Hon'ble Apex Court in the 17 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, case of CIT v. C.P. Sarathy Mudaliar (83 ITR 170). As per ld. CIT(Appeals), the facts wee not in dispute, but, according to him, a 'shareholder' as mentioned in Section 2(22)(e) of the Act, after the amendment made on 1.4.1988, had to be the beneficiary of the shares, to be roped in under Section 2(22)(e). According to ld. CIT(Appeals), assessee had transferred two lakhs shares to her minor grandson and therefore, the benefit of said shares was to be received by the said minor grandson and not by the assessee. Hence, irrespective of the position shown by the assessee in her own balance sheet, the fact was that assessee was not holding beneficiary interest in the shares transferred by her to her minor grandson. When this holding was deducted, there was no dispute that assessee was holding only less than 10% of the voting power of M/s Prakash Gold Palace (P) Ltd. Ld. CIT(Appeals) also noted that Section 94 of the Act had no relevance because it dealt with sale of securities and Section 64 also had no relevance because it dealt with clubbing of minor's income with parent concerned. He, therefore, held that assessee was not a beneficiary shareholder having more 18 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, than 10% voting power and hence, Section 2(22)(e) of the Act could not be applied. He deleted the addition made for deemed dividend for both the years.
17. Now before us, learned D.R., strongly assailing the order of ld. CIT(Appeals), submitted that transfer of shares by the assessee in such a manner that her voting power in the company went below 10%, could not be considered since the transferee was only a minor. According to learned D.R., assessee had personally shown the share holding in her balance sheet as her own, and for this reliance was placed on paper-book page 7 filed by him. As per the learned D.R., in the balance sheet for the respective previous years, assessee had shown as her own, the share capital held in Prakash Gold Palace (P) Ltd. by herself as well as her grandshon. Learned D.R. pointed out that letter filed by the assessee on 13th December, 2007 before the Assessing Officer, placed at his paper-book page 2 to 4, clearly showed that the amount of ` 45 lakhs taken by the assessee as advance from M/s Prakash Gold Palace (P) Ltd. was used by her for making investment in one M/s ITCOT Ltd. and therefore, whole of the 19 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, benefit was enjoyed by the assessee herself. This investment made by the assessee was shown by her in her own balance sheet, as per the learned D.R. According to him, transfer made by the assessee to her grand daughter could not be considered for reckoning the threshold limit of shares for the purpose of applying of Section 2(22)(e) of the Act. Relying on the decision of Hon'ble jurisdictional High Court in the case of CIT v. T.P.S.H. Sokkalal (236 ITR 981), learned D.R. argued that when the shares were held in the name of the guardian, the guardian alone was the shareholder and the guardian could exercise the voting right belonging to the minor. Hence, as per the learned D.R., by virtue of decision of jurisdictional High Court, deemed dividend under Section 2(22)(e) of the Act could be considered in the hands of such assessee who was the guardian of a minor. Reliance was also placed on the decision of Delhi Bench of this Tribunal in the case of Mohan Anand (82 ITD 708) in this regard.
18. Per contra, the learned A.R. submitted that admittedly, assessee had transferred more than 90% of shares to her grand 20 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, daughter much prior to relevant previous years. As per learned A.R., the transfer of shares was done on 22.12.2001 and the transfer was properly intimated to Registrar of Companies and entered in the relevant register of the company. All these facts were brought to the notice of the Assessing Officer. Learned A.R. submitted that assessee could not have contemplated that she would be taking an advance for the purpose of investing in M/s ITCOT Ltd. during the relevant previous year 2002-03 and 2003-04 as early as 22.12.2001. Hence, according to him, there was no colourable exercise so as to avoid tax by the assessee. Further, as per learned A.R., Companies Act, 1956 did not prohibit share holding by a minor and minor could always be a beneficiary though he/she could not be registered as a shareholder. According to him, Revenue had not disputed the transfer of shares made by the assessee to her grandson and the fact that such transfer had brought her own holding much less than 10%. According to him, assessee to be liable for deemed dividend, he or she, not only had to be a registered shareholder but also had to be the beneficiary thereon. This position, according to him, was clearly 21 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, laid down by Special Bench of this Tribunal in the case of ACIT v. Bhaumik Colour (P) Ltd. (118 ITD 1). In so far as reliance placed by the learned D.R. on the decision of Hon'ble jurisdictional High Court in the case of T.P.S.H. Sokkalal (supra), learned A.R. submitted that the said decision related to assessment year 1973-74 and there were subsequent amendments in Section 2(22)(e) thereof. According to him, Section as it stood when the jurisdictional High Court was considering the issue, there was no room for an interpretation that assessee should be both beneficial as well as registered shareholder, for applying of Section 2(22)(e) of the Act. According to him, the position had substantially changed by virtue of amendments to Section 2(22)(e) by Finance Act, 1987 with effect from 1.4.1988. Learned A.R. further pointed out that Special Bench had considered the effect of such amendments and came to a conclusion that only a registered as well as a beneficial shareholder could be considered for assessment of deemed dividend on advances and loans received. Relying on the decision of Hon'ble Allahabad High Court in the case of CIT v. Raj Kumar Singh & Co. (295 ITR 9), learned A.R. submitted 22 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, that their Lordship, after considering the amended provision, settled the issue of beneficial ownership of shares in favour of the assessee.
19. In reply, learned D.R. placing reliance on an order of this Tribunal in the case of Shri Haridass Menon v. ACIT in I.T.A. No. 1620/Mds/2006 dated 11th June, 2010, submitted that in cases where a family member of the assessee himself was holding the shares of a company, it was required to lift corporate veil and see whether the benefits were received by the family as a whole on the advance received by the assessee. According to him, share holding of the family members altogether if considered exceeded 10% voting power limit specified in Section 2(22)(e) of the Act.
20. We have perused the orders and heard the rival contentions. Facts are not disputed. Prior to 22.12.2001, assessee held shares having more than 10% of the voting power of M/s Prakash Gold Palace (P) Ltd., earlier known as Abhilasha International Pvt. Ltd. By effecting transfers to her minor grand-child, her shareholding had 23 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, come down substantially and her voting power in the said company went below 10%. There is also no dispute that transfers of the shares were effected by proper entries on the share certificates and returns were filed in this regard before the Registrar of Companies. There is also no dispute that the transfer of shares were effected prior to the relevant previous years. There is good merit in the contention of the assessee that transfer made by the assessee to her grand- child could not have been done in contemplation of receiving an advance from M/s Prakash Gold Palace (P) Ltd. We cannot say that it was a colourable device adopted by the assessee to evade tax payment. Since Section 2(22)(e) of the Act, as often held by various Courts, is a deeming provision, fictionally converting advances and loans taken to dividend, it requires a strict interpretation. When the rules of strict interpretation are to be applied to a particular provision, the question of adoption of colourable device cannot be applied with the same gutso as with other provisions. Application of principle of colourable exercise, to such fictional provision would not be fair, in our opinion, unless a very strong case in this regard is made out by 24 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, the Revenue. Revenue might have had a case if a transfer of shares were effected by the assessee after the receipt of the advance. But, as such, this was not done so. No doubt, by virtue of this transfer, assessee's name did not get effaced from the register of shareholders of M/s Prakash Gold Palace (P) Ltd. Nevertheless, as a result of such transfer, benefit of such shares whatever it might be would ultimately ensue to the grand-child of the assessee. When the benefit was with the grand-child, we cannot say assessee was a beneficiary of the holding. A beneficial holder means a person who is enjoying benefits from the holding and this admittedly was not the assessee in so far as the transferred shares were concerned. In our opinion, the decision of Special Bench of this Tribunal in Bhaumik Colour (P) Ltd. (supra) is very relevant in this regard. The question raised before the Special Bench was as under:-
(1) Whether deemed dividend under s. 2(22)(e) of the I.T. Act, 1961 can be assessed in the hands of a person other than a shareholder of the lender?
(2) Whether the words "such shareholder" occurring in s.
2(22)(e) refer to a shareholder who is both 'registered' shareholder and the beneficial shareholder?
25 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, The answer given is clear from para 24 thereof which is reproduced hereunder:-
"24. The expression "shareholder being a person who is the beneficial owner of shares" referred to in the first limb of s. 2(22)(e) refers to both a registered shareholder and beneficial shareholder. If a person is a registered shareholder but not the beneficial then the provision of s. 2(22)(e) will not apply. Similarly if a person is a beneficial shareholder but not a registered shareholder then also the first limb of provisions of s. 2(22)(e) will not apply."
Thus, it is absolutely clear that for being held liable for deemed dividend, assessee has to be both registered as well as beneficial shareholder. Assessee here was not so. Thus, assessee gets out of the deeming provision as contained in Section 2(22)(e) at the threshold itself. In our opinion, how the assessee utilized the advance received from M/s Prakash Gold Palace (P) Ltd. hardly has any relevance, once applicability of Section 2(22)(e) of the Act is ruled out. As far as the decision of Hon'ble jurisdictional High Court in the case of T.P.S.H. Sokkalal (supra) relied on by the learned D.R. is concerned, interpretation there involved Section 2(22)(e) of the Act as it stood prior to the amendment done to the said Section by 26 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, Finance Act, 1987 with effect from 1.4.1988. Their Lordship was concerned with an assessment for assessment year 1973-74. In fact, in the decision of Special Bench in the case of Bhaumik Colour (P) Ltd. (supra), the history of the provision starting from 1922 Act has been traced vividly and it was after an analysis thereof that the Special Bench held present provisions after amendments to have application only if shares were held both as beneficial as well as registered shareholder. As for the reliance placed by learned D.R. on the decision of co-ordinate Bench of this Tribunal in the case of Shri Haridass Menon (supra), there the total shareholding of the company was fully held by assessee and his wife. Lifting of corporate veil was invited since there were no other shareholders except the assessee and his wife and deemed dividend was initially returned by the assessee in the return filed in pursuance of notice under Section 148 of the Act. We are of the opinion that this decision of the Tribunal would not be of any application on facts here. The transfer of shares here were effected prior to relevant previous years and there were a number of shareholders in M/s Prakash Gold Palace (P) Ltd. It was 27 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, not a make-believe set-up like a company where only an assessee and his/her spouse were the shareholders. Lifting of corporate veil is an exceptional measure and definitely not warranted in the circumstances here. As for the decision of Delhi Bench of this Tribunal in the case of Mohan Anand (supra), the shares were acquired by minor sons of the assessee concerned out of foreign credits received by them, where the genuineness of such credits was not established. Here, there is no case for the Revenue that there were any foreign credits or funds received by the grand-child of the assessee concerned. Even otherwise, the said decision was rendered much prior to the decision of Special Bench in the case of Bhaumik Colour (P) Ltd. (supra) and therefore, would be hardly of any relevance. We are, therefore, of the opinion that ld. CIT(Appeals) was justified in deleting the additions made for deemed dividend for both the assessment years. We do not find any reason to interfere with the order of ld. CIT(Appeals).
21. In the result, both the appeals of the Revenue stand dismissed. 28 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
22. Now we take up appeal of the assessee in I.T.A. No. 488/Mds/2010. In this appeal, assessee assails the order dated 15.3.2010 of Commissioner of Income Tax, Chennai-III, Chennai, passed under Section 263 of the Act, for assessment year 2003-04. As per the assessee, there was nothing erroneous or prejudicial in the order of the Assessing Officer which warranted invocation of revisional power under Section 263 of the Act.
23. Short facts apropos are that on the assessment done of the assessee under Section 143(3) read with Section 147 of the Act on 26.12.2007, ld. CIT issued a show-cause notice under Section 263 of the Act on 3.3.2010 citing following reasons:-
"The assessee filed his return of income for Assessment Year 2003-04 on 31.03.2004 admitting an income of Rs.78,640/- and agricultural income of Rs.54,810/-. The return was scrutinized and the assessment was completed u/s.143(3) 5.w.s. 147 on 26.12.2007 on a total income of Rs.45,70,230/- and agricultural income of Rs.54,810/-.
The Assessing Officer while completing the assessment u/s.143(3) r.w.s. 147 had not considered the following facts because of which the assessment has been rendered erroneous in so far as it is prejudicial to the interests of Revenue.29 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
1. to verify the agricultural income amounting to Rs.54,810/-.
2. Investment of Rs.45 lakhs made in ITCOT Ltd.,
3. not admitted any notional income from Bombay and Calcutta property.
In this connection, you are hereby given show cause notice as to why direction should not be given to revise the impugned order u/s.263 of the Income Tax Act, 1961 on the above issue. If no reply is received, it will be presumed that you have no objection in revising the assessment for the Assessment Year 2003-04 on the proposed lines."
24. Submission of the assessee before ld. CIT was that it had challenged the reopening done by the A.O. for the impugned assessment year. According to the assessee, the matter had to be kept in abeyance till the outcome of the appeal of the assessee. However, ld. CIT was of the opinion that assessee had nothing to say about the issues raised against her in the notice dated 3.3.2010. According to him, assessee had made substantial investment in M/s ITCOT Ltd. and Assessing Officer had completed the assessment without making any enquiries in this regard. He, therefore, set aside the order of assessment and required the A.O. to make a fresh assessment, after making specific enquiries on the issues mentioned by him in the show-cause notice.
30 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
25. Now before us, learned A.R., assailing the order of ld. CIT, submitted that investment of ` 45 lakhs in M/s ITCOT Ltd. was a subject matter of addition under Section 2(22)(e) of the Act by the Assessing Officer. Therefore, according to him, the Assessing Officer had made proper enquiries and found that the said investment had come out of advance taken by the assessee from M/s Prakash Gold Palace (P) Ltd. Hence, learned A.R. submitted that ld. CIT was absolutely wrong in coming to a conclusion that the Assessing Officer had not made any enquiries. With regard to agricultural income, learned A.R. submitted that details in this regard were also asked by the Assessing Officer during the course of original assessment proceedings and were provided. According to him, it was mentioned by the assessee that she had agricultural land at Vedal Village in her letter dated 13th December, 2007 to the Assessing Officer placed at Department paper-book pages 2 to 4. Details of the property at Bombay and Calcutta were also given to the Assessing Officer in the said letter. Therefore, according to him, Assessing Officer had properly considered these issues and completed the assessment. 31 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, There was nothing to consider such assessment as erroneous and prejudicial to the interests of the revenue.
26. Per contra, learned D.R. submitted that assessee never gave the details of the investment which was made in M/s ITCOT Ltd. According to him, assessee had not given details of agricultural income or the extent of holding of the property. Relying on the balance sheet filed by the assessee, learned D.R. pointed out that property at Vedal Village was valued at ` 55,897.20 and on such a property agricultural income of ` 54,810/- was shown. Therefore, according to him, there was clear non-application of mind by the A.O. on these issues and invocation of revisional power under Section 263 of the Act was appropriately done by ld. CIT.
27. We have perused the orders and heard the rival contentions. In so far as agricultural income of ` 54,810/- was concerned, assessee had given only the location of property and nature of crops as rice and vegetable. It is also true that value of Vedal Village property was shown by the assessee as 55,897.20 only. Assessing Officer 32 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, accepted the reply given by the assessee vide her letter dated 13th December, 2007 without making any enquiry. Income from property being almost in the vicinity of the value of the property itself, in our opinion, it should have caught the attention of the A.O. and he should have made more enquires. This was not done. Similarly, on notional income of Mumbai and Calcutta property also, there was no proper answer given by the assessee nor any enquiries done by the A.O. However, with regard to investment of ` 45 lakhs made by the assessee in M/s ITCOT Ltd., Assessing Officer considered it to be deemed dividend, the amount having been received by the assessee from M/s Prakash Gold Palace (P) Ltd. The account statement wherein the advance received by the assessee through bank from the said company, and investment made by the assessee in M/s ITCOT Ltd. were reflected in the relevant bank statement filed by the learned A.R. in the course of original assessment proceedings. Thus, assessee had clearly shown the details of the source of ` 45 lakhs that she had invested in M/s ITCOT Ltd. Assessee could not give any information regarding the purpose of investment in ITCOT Ltd. 33 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, except stating that it was given bidding for property. However, the question regarding the source of investment was definitely provided at the time of original assessment proceedings and considered in the assessment. We cannot say A.O. had not applied his mind here. There was no error in this regard much less any that could be termed as prejudicial to the interests of the revenue. Hence, in so far as the issue relating to investment of ` 45 lakhs in ITCOT Ltd. is concerned, we are of the opinion that there was no error in the order of Assessing Officer which was prejudicial to the interests of the revenue. In so far as other two issues, namely, agricultural income of ` 54,810/- and notional income from Mumbai and Calcutta property, there was no enquiry made by the Assessing Officer at the assessment stage. Hence, we can say there was error which was prejudicial to the interests of the revenue on these two items. We, therefore, uphold the order of ld. CIT under Section 263 in so far as it relate to agricultural income and notional income from Mumbai and Calcutta property, whereas, quash his order so far as it relates to investment of ` 45 lakhs made in ITCOT Ltd.
34 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
28. In the result, appeal of the assessee stands partly allowed.
29. Now we take up the cross-objections of the assessee Shri D.B. Prakash Chand Jain in C.O. Nos. 195, 196 & 197/Mds/2009. These cross-objections go to the root of the assessments for the respective assessment year.
30. Two issues are raised in these cross-objections. First is that Assessing Officer was not having jurisdiction to do an assessment on the assessee and second is that the reopenings done were bad in law. Both these issues are similar to the issues raised by the assessee Smt. Suraj Kumari Jain in her cross-objections in C.O. Nos. 193 and 194/Mds/2009. The factual situation were also same. We have held at paras 7 & 11 above that objection of the assessee on both these issues are without any merit. For the same reasons as mentioned at paras 7 & 11 above, we dismiss the cross-objections of the assessee here also.
35 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
31. Now we take up the appeal of the Revenue for assessment years in I.T.A. Nos. 1631, 1632 & 1633/Mds/2009 in respect of the assessee Shri D.B. Prakash Chand Jain.
32. As in the case of Smt. Suraj Kumari Jain, assessee here was also a shareholder holding shares in excess of 10% of voting power in M/s Prakash Gold Palace (P) Ltd. On 22.12.2001, assessee had transferred substantial quantum from his shares to his minor grand daughter, Hardika. Through such transfer, the share holding of the assessee came down below 10% of the voting power in M/s Prakash Gold Palace (P) Ltd. Factual situation is thus very similar to that of Smt. Suraj Kumari Jain for assessment year 2003-04 and assessment year 2004-05. The appeals of the Revenue in the case of Smt. Suraj Kumari Jain in I.T.A. Nos. 1629 & 1630/Mds/2009 for assessment years 2003-04 and 2004-05 have been dismissed by us after considering the issues raised in this regard. However there is a slight change in the factual scenario in so far as this assessee, D B Prakash Chand Jain is concerned for Assm. year 2002-03. The difference here is that the transfer of shares was effected by the 36 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, assessee on 22-12-2001, which falls within the currency of the previous year relevant for Assm Year 2002-03. Hence the question props up as to whether the transfer could be termed as a colourable exercise, for getting out of the clutches of section 2(22)(e), since assessee had taken an advance of Rs 14,98,328/- from Prakash Gold Palace Pvt Ltd., during the relevant previous year. In our opinion the question of colourable exercise would not arise in the instant transfer, since there were no series of transactions but only one transfer. When a person transfers his asset to a child or grandchild, the question of any commercial intention cannot be fastened to such a transaction. It may have no relevance, for, there might be myriad of reasons for effecting such a transfer. It cannot be seen as an act done with the only intention of reducing tax liability, especially of a nature arising from a deeming provision. Where such transfers are without consideration, clubbing provisions have been built into the Act for preventing loss of tax. Such clubbing provision which itself are deeming sections cannot be so extended to bring within its fold, another deeming section like 2(22)(e), for roping in a person within 37 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, the clutches of deemed dividend, despite transfer of shares effected by him. There is no case for the Revenue here that the advance from the company was taken by the assessee before 22-12-2001, when the assessee effected the transfer to his minor child/grandchild. Hence as on the date when assessee received the advance, he was not holding more than 10% of the voting rights in the concerned company. Therefore in our opinion the change in fact situation will not affect the outcome of the case in any way. For these and other reasons discussed at para 20 above, in relation to the Revenue appeals in the case of Smt Suraj Kumari Jain we do not find any reason to interfere with the orders of the Ld CIT(A) in any of the years involved. Assessee not being the beneficial as well as registered shareholder having voting power in excess of 10% in M/s Prakash Gold Palace (P) Ltd. could not be fastened with liability under Section 2(22)(e) of the Act, considering the advance taken by him from the said company as deemed dividend.
33. In the result, appeals of the Revenue for all these years stand dismissed.
38 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
34. Now we take up the appeals and cross-objections in the case of assessee Shri Mukesh Kumar Jain.
35. The cross-objections in the case of Shri Mukesh Kumar Jain in C.O. Nos. 198 & 199/Mds/2009 go to the root of the assessment.
36. Two issues are raised in these cross-objections. First is that Assessing Officer was not having jurisdiction to do an assessment on the assessee and second is that reopenings done were bad in law. Both these issues are similar to the issues raised by the assessee Smt. Suraj Kumari Jain in her cross-objections in C.O. Nos. 193 and 194/Mds/2009. The factual situations were also same. We have held at paras 7 & 11 above that objections of the assessee on both these issues are without merits. For the same reason, as mentioned at paras 7 & 11, we dismiss the cross-objections of the assessee here also.
37. Now we take up appeals of the Revenue in I.T.A. Nos. 1640 & 1641/Mds/2009 of Shri Mukesh Kumar Jain. As in the case of other 39 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, two assessees, Shri Mukesh Kumar Jain also holding more than 90% of the voting power in M/s Prakash Gold Palace (P) Ltd., had transferred on 22.12.2001 substantial quantum of his shares to his minor son. By virtue of this, his holding was reduced below 10% of voting power therein. The factual situation is very similar to that in the case of Smt. Suraj Kumari Jain. We have already held in the Revenue's appeals in the case of Smt. Suraj Kumari Jain, in I.T.A. Nos. 1629 & 1630/Mds/2009 that only a registered as well as beneficial shareholder could be considered for a deemed dividend addition taking an advance received as deemed dividend. For the same reason mentioned in para 20 above, we hold that assessee could not have been considered as a recipient of deemed dividend under Section 2(22)(e) of the Act. Therefore, appeals of the Revenue for both the assessment years stand dismissed.
38. This leaves us with appeals of the assessee in I.T.A. Nos. 486 & 487/Mds/2010. Through both the appeals, assessee assails invocation of revisional power by ld. CIT under Section 263 of the Act for respective assessment years. Ld. CIT had issued notice to the 40 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, assessee under Section 263 of the Act citing the following reason and required him to show cause reason why the assessment should not be set aside:-
For assessment year 2003-04:
"The assessee filed his return of income for the Asst. Year 2003-04 on 05.04.2004 admitting an income of Rs.91,670/- and agricultural income of Rs.57,255/-. The return was scrutinized and the assessment was completed u/s 143(3) r.w.s. 147 on 26.12.2007 on a total income of Rs.46,31,262/- and agricultural income of Rs.57,255/-.
The assessee is Director of M/s Prakash Gold Palace (P) Ltd., (formerly known as M/s Abhilasha International P. Ltd.). The Assessing Officer while completing the assessment u/s 143(3) r.w.s. 147 had not examined the following aspects which is erroneous in so far as it is prejudicial to the interests of Revenue.
1. to verify the agricultural income amounting to Rs.57,255/-
2. Investment of Rs.45 lakhs made in ITCOT Ltd.
In this connection, you are hereby given show-cause notice as to why direction should not be given to revise the impugned order u/s 263 of the Income-tax Act, 1961 on the above issue. If no reply is received, it will be presumed that you have no objection in revising the assessment for the Asst. Year 2003-04 on the proposed lines."
For assessment year 2004-05:
41 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, "The assessee filed his return of income for the Asst. Year 2004-05 on 27.10.2004 admitting an income of Rs.2490/- and agricultural income of Rs.2,488/-. The return was scrutinized and the assessment was completed u/s 143(3) r.w.s. 147 on 26.12.2007 on a total income of Rs.48,13,950/- and agricultural income of Rs.57,255/-. The assessee is Director of M/s Prakash Gold Palace (P) Ltd. (formerly known as M/s Abhilasha International P. Ltd.). The Assessing Officer while completing the assessment u/s 143(3) r.w.s. 147 had not examined the following aspects which is erroneous in so far as it is prejudicial to the interests of Revenue.
1. to verify the agricultural income amounting to Rs.62,613/-
2. Investment of Rs.45 lakhs made in ITCOT Ltd.
3. sale of agricultural land amounting to Rs.29,867/- has not been offered
4. claim of deduction u/s 80D amounting to Rs.8294/-.
In this connection, you are hereby given show-cause notice as to why direction should not be given to revise the impugned order u/s 263 of the Income-tax Act, 1961 on the above issue. If no reply is received, it will be presumed that you have no objection in revising the assessment for the Asst. Year 2004-05 on the proposed lines."
39. With regard to the investment made by the assessee in ITCOT Ltd., we have already held that Assessing Officer had made proper enquiries and assessee had given detailed replies during the course of assessment, in the case of Smt. Suraj Kumari Jain, at para 27 supra. The Assessing Officer after due application of mind, had 42 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, come to a conclusion that the investment made by the assessee was out of advance received by him from M/s Prakash Gold Palace (P) Ltd. and such advance was considered for addition under Section 2(22)(e) of the Act. This being the case, we are of the opinion that the Assessing Officer had made proper enquiries and there was no error whatsoever in the order of the A.O. in so far as investment in M/s ITCOT Ltd. was concerned. In any case, for assessment year 2004-05, there was no additional investment whatsoever made by the assessee in M/s ITCOT Ltd. but only repayment received by the assessee from the said company. However, with regard agricultural income, the Assessing Officer had not made any proper enquiry on the details furnished by the assessee. Assessee had not given the extent of the holding or any evidence for the receipt of agricultural income. Similarly, for sale of agricultural land, one of issues raised by ld. CIT for assessment year 2004-05, also there was no enquiries conducted by the Assessing Officer while completing the assessment. The learned A.R. could not place any evidence before us that assessee had given full particulars with regard to sale of 43 I.T.A. Nos. 1629 to 1633/Mds/09, C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09, agricultural land. In so far as claim of deduction under Section 80D for assessment year 2004-05 is concerned, it is an admitted position that the assessee had given evidence for such deduction along with the return of income and this definitely would have been considered by the A.O. while giving such deduction.
40. In a nutshell, we hold that the orders of ld. CIT for both the assessment years, in so far as it relates to investment in M/s ITCOT Ltd. was not warranted. However, in so far as the aspect of agricultural income and sale of agricultural land is concerned, the Assessing Officer was silent and no proper enquiries having been done, the order under Section 263 was justified. Vis-à-vis claim of deduction under Section 80D of the Act, the Assessing Officer gave such a deduction after considering the evidence filed by the assessee along with return and therefore, it cannot be considered as erroneous and prejudicial to the interests of the revenue. Therefore, we uphold the order of ld. CIT in so far as it relates to aspects other than investment in M/s ITCOT Ltd. and claim of deduction under Section 80D of the Act are concerned. Ordered accordingly. 44 I.T.A. Nos. 1629 to 1633/Mds/09,
C.O. Nos. 193 to 199/Mds/09, I.T.A. No. 486 to 488/Mds/10, I.T.A. Nos. 1640 & 1641/Mds/09,
41. In the result, both the appeals of the assessee are partly allowed.
42. To summarise the results, appeals of the Revenue in I.T.A. Nos. 1629, 1630, 1631, 1632, 1633, 1640 & 1641/Mds/2009, as well as Cross-objections of the assessee in C.O. Nos. 193, 194, 195, 196, 197, 198 & 199/Mds/2009 are dismissed, whereas, appeals of the assessees in I.T.A. Nos. 486, 487 and 488/Mds/2010 are partly allowed.
Order pronounced in the Court on 29th July, 2011.
Sd/- sd/-
(Hari Om Maratha) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 29th July, 2011.
Kri.
Copy to: Assessee/Assessing Officer/CIT(A)-V, Chennai-34/ CIT, Chennai-III, Chennai/D.R./Guard file